REPUBLIC OF THE PHILIPPINES BUREAU OF LOCAL GOVERNMENT FINANCE DEPARTMENT OF FINANCE ‘1h Floor EDPC Building, Bangko Sentral ng Pilipinas Complex Roxas Boulevard, Manila 100 fax Nos. 527-2780 527-2790 “Samal: big gow ph POLICY, PLANNING, PROGRAMMING AND STANDARD 29 February 2016 JOSE CARLOS S. BAIZAS Director for Legal and HR Manpower Group 21* Floor, Strata 2000 F. Ortigas, Jr. Ave., Ortigas Center Pasig City 1600 SUBJECT : Request for a Ruling or Opinion on the Requirement of a Client to Apply for Business License (Permit) and Pay Local Business Taxes for Work Performed by Personnel of Manpower Outsourcing Services, Inc. (MOSI) in Tanauan City Where the Company has no Physical Presence Sir This refers to your letter dated 23 February 2016 requesting for a ruling or opinion regarding the request of your client in Tanuan City, Batangas, to apply for a business license thereat and pay local business taxes for the work performed by the personnel of your company, Manpower Outsourcing Services, Inc. (MOSI), to said client. Itis represented that MOS| is a business engaged in job contracting and outsourcing services. MOSI provides temporary staffing services to its clients by assigning its regular employees to render various services to meet its client's business needs. The Company is authorized by the Department of Labor and Employment (DOLE) to engage in such business activity and has a DO 18-A, Series of 2011 license for such purpose. Further, it is submitted that MOSI has a client in Tanauan City, Batangas, and has deployed certain associates to render services to said client in its office premises thereat. MOSI maintains no sales office or other physical presence in Tanauan City All sales, invoicing and other income-generating activities are performed in the main office in Ortigas Center, Pasig City.In this connection and for the early resolution of the herein matter concerning the request of your client to apply for a business license, attached for your guidance is our letter dated January 27, 2015 in the case of STERIX Incorporated wherein this Bureau expressed the following views: ‘With regard to the required business permit, this Bureau, based on the information submitted, believes that there is no need for STERIX to secure business permit from local government units concerned as the presence of its personne! to said localities is merely to fulfil its contractual obligation to its clientele and their presence to carry out this obligation contracted by the business from their clients is only temporary. This opinion is expressed in view of the tenets embodied in Section 147 which provides that the imposition and collection of such regulatory fee (business permit fee) "commensurate with the cost of regulation, inspection and licensing before any person may engage in such business. ‘To elucidate and affirm our stand on the issue and as viewed from a different perspective, the absence of any branch office, sales outlet or warehouse of STERIX Fepudiate the requirement of securing business permit as, in the first place, there is no fixed business establishment to regulate, inspect, and issue license to justify the imposition, For after all how can a regulating authority impose its authority to regulate when the very subject of the regulation is non-existent.” On the issue of local business taxes (LBT) the governing provision of law is Section 143 of the Local Government Code (LGC) of 1991, which provides: “Section 143. Tax on Business, - The municipality may impose taxes on the following businesses: (a) xxx" With gross sales or receipts for the preceding calendar year in the amount of...” (boldfacing for emphasis) Applying the preceding provision of the LGC in the instant case, Tanauan City has no basis to tax the gross sales or receipts realized by MOSI as payments for services rendered to client located in said City, considering the representation made that all sales, receipts, invoices and other income-generating activities are performed in Pasig City where the principal/head office is located. Stated otherwise, even if the Cily Treasurer's Office of Tanauan would contemplate to issue an assessment demanding the payment of LBT for sales contracted by MOSI from its client thereat, still there is no basis (gross sales/receipts) to speak of since sales are recorded in Pasig City and therefore taxable by same City where MOS''s principal/head office is located. In one occasion, the Court, in a case to some extent similar to the herein issue, ratiocinated in this manner: “The Court ruled in favor of NEPC citing the applicable provisions of the Local Government Code which clearly states that establishments maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet 2016-0144-Request for opinion on the need to secure Mayor's Permit and payment of LBT Page 2 of 3 pagesmaking the sale or transaction, and the tax thereon shall accrue and shall be paid to the municipality where such branch and sales outlet is located. Hence, the action of the City Treasurer of Makati is impermissible because to do so would be sanctioning or encroaching upon the prerogatives of another co-equal and autonomous local government.” (Boldfacing for emphasis) The above views are being rendered based and in accordance to the representations made and information supplied. However, if upon verification and investigation by any concerned entity the same shall be proven the contrary, the foregoing views shall be considered null and void We hoped that this will help clarify matters. Very truly yours, & 7. tenken JOCELYN T. PENDON OIC-Executive Director * City of Makati, through its Mayor and the Office of the Cy Treasurer of Makati City, through the Hon. Nelia A Barlis vs. Nippon Express Philipines Corporation, CTA Case No. 76, February 17, 2012 :2016-0144-Request for opinion on the need to secure Mayor's Permit and payment of LBT Page 3 of 3 pages‘making the sale or transaction, and the tax thereon shall accrue and shall be paid to the municipality where such branch and sales outlet is located. Hence, the action of the City Treasurer of Makati is impermissible because to do so would be sanctioning or encroaching upon the prerogatives of another co-equal and autonomous local government."' (Boldfacing for emphasis) The above views are being rendered based and in accordance to the representations made and information supplied. However, if upon verification and investigation by any concerned entity the same shall be proven the contrary, the foregoing views shall be considered null and void We hoped that this will help clarify matters. Very truly yours, cig Te tendon bet T. PENDON O1C-Executive Directoy, roi? * city of Makati, through its Mayor and the Office of the Cily Treasurer of Makati City, through the Hon. Nelia A. Baris vs, Nippon Express Philippines Corporation, CTA Case No. 76, February 17, 2012 2016-0144-Request for opinion on the need to secure Mayor's Permit and payment of LBT Page 3 of3 pagesBLGF OPINION NO, POLICY, PLANNING, PROGRAMMING AND STANDARD DIVISION 29 February 2016 JOSE CARLOS S. BAIZAS Director for Legal and HR Manpower Group 21° Floor, Strata 2000 F. Ortigas, Jr. Ave., Ortigas Center Pasig City 1600 SUBJECT : Request for a Ruling or Opinion on the Requirement of a Client to Apply for Business License (Permit) and Pay Local Business Taxes for Work Performed by Personnel of Manpower Outsourcing Services, Inc. (MOSI) in Tanauan City Where the Company has no Physical Presence Sir: This refers to your letter dated 23 February 2016 requesting for a ruling or opinion regarding the request of your client in Tanuan City, Batangas, to apply for a business license thereat and pay local business taxes for the work performed by the personnel of your company, Manpower Outsourcing Services, Inc. (MOS), to said client Itis represented that MOSI is a business engaged in job contracting and outsourcing services, MOSI provides temporary staffing services to its clients by assigning its regular employees to render various services to meet its client's business needs. The Company is authorized by the Department of Labor and Employment (DOLE) to engage in such business activity and has a DO 18-A, Series of 2011 license for such purpose. Further, it is submitted that MOSI has a client in Tanauan City, Batangas, and has deployed certain associates to render services to said client in its office premises thereat. MOSI maintains no sales office or other physical presence in Tanauan City All sales, invoicing and other income-generating activities are performed in the main office in Ortigas Center, Pasig City.In this connection and for the early resolution of the herein matter concerning the request of your client to apply for a business license, attached for your guidance is our letter dated January 27, 2015 in the case of STERIX Incorporated wherein this Bureau expressed the following views: "With regard to the required business permit, this Bureau, based on the information submitted, believes that there is no need for STERIX to secure business permit from local government units concemed as the presence of its personnel to said localities is merely to fulfll its contractual obligation to its clientele and their presence to carry out this obligation contracted by the business from their clients is, only temporary This opinion is expressed in view of the tenets embodied in Section 147 which provides that the imposition and collection of such regulatory fee (business permit fee) "commensurate with the cost of regulation, inspection and licensing before any person may engage in such business.” To elucidate and affirm our stand on the issue and as viewed from a different perspective, the absence of any branch office, sales outlet or warehouse of STERIX repudiate the requirement of securing business permit as, in the first place, there is no fixed business establishment to regulate, inspect, and issue license to justify the imposition. For after all haw can a regulating authority impose its authority to regulate when the very subject of the regulation is non-existent.” On the issue of local business taxes (LBT) the governing provision of law is Section 143 of the Local Government Code (LGC) of 1991, which provides: "Section 143. Tax on Business. - The municipality may impose taxes on the following businesses: fa) xxx" With gross sales or receipts for the preceding calendar year in the amount of”. .."(boldfacing for emphasis) Applying the preceding provision of the LGC in the instant case, Tanauan City has no basis to tax the gross sales or receipts realized by MOSI as payments for services rendered to client located in said City, considering the representation made that all sales, receipts, invoices and other income-generating activities are performed in Pasig City where the principal/head office is located. Stated otherwise, even if the City Treasurer's Office of Tanauan would contemplate to issue an assessment demanding the payment of LBT for sales contracted by MOS! from its client thereat, still there is no basis (gross sales/receipts) to speak of since sales are recorded in Pasig City and therefore taxable by same City where MOSI's principal/head office is located. In one occasion, the Court, in a case to some extent similar to the herein issue, ratiocinated in this manner: “The Court ruled in favor of NEPC citing the applicable provisions of the Local Government Code which clearly states that establishments maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet 2016-0144.Request for opinion on the need to secure Mayor's Permit and payment of LAT Page 2 of 3 pagesREPUBLIC OF THE PHILIPPINES BUREAU OF LOCAL GOVERNMENT FINANCE, DEPARTMENT OF FINANCE Sth Flnor BDPC Building, Baygko Senta ng Pilipicas Complex Roxas Boulevard, Maila 1004 * Telefix Nos. 827-2780 527-2790 Email: bg(@blafgov ph Ofial Website: wove bgt guvph January 27, 2015 Mr. JORGE DAVIDE, JR. Managing Director STERIX Incorporated Unit 1201 South Center Tower 2206 Market St., Madrigal Business Park Alabang, Muntinlupa City Sir This refers to your letter dated November 21, 2014 requesting for an opinion on the requirements of getting a separate business permit with the local government unit, ‘The following are the pertinent circumstances in relation to your request: 1. STERIX INC, (STERIX) is a duly registered domestic corporation that is engaged in providing pest control services and in the distribution of a limited number of pest control chemicals. STERIX’s principal office is in Muntinlupa City where it is paying its business taxes based on 100% of its gross sales, and for which a business permit is issued. All sales invoices are issued from the said office only. 3, STERIX has contracts for pest control services in different locations (in different local government units). These contracts range from one year to two years and you only have about one to three personnel in one location. In one client only you have about ten personnel performing services in fulfillment of the service contract. (sic) 4, All job orders and sales invoices emanate solely from the principal office and there are xno other registered offices (branches or warehouses) in other local government units, 5. There is a local government unit, particularly Marikina City, which simply requires an accreditation permit for pest control companies before the latter can perform its obligations as part of its service contract. The business permit issued by Muntinlupa City is simply an attachment for the issuance of said accreditation. 6, Some of your clients have been requiring you to acquire a separate business permit fiom the local government unit where they are located. Despite the representations to the contrary, you have been forced to get a business permit from the local government unit concemed, Also, local government units compute the cost of the permit based on the entire revenue of your operations. “Tagapagtaguyod ng Tapat, Responsable at Makabuluhang Pag-iingat Yaman at Pagtatasa ng Pamahalaang Lokal”it may be mentioned that this Bureau referred the said letter to the City Treasurer of Marikina for comment and/or appropriate action under a 1* Idorsement dated December 9, 2014, In turn, Ms. Thelma T. Quilingking, City Treasurer of Marikina likewise referred the issue to Atty. Nancy V. Teylan, Chief of the Business Permits and Licensing Office (BPLO), same City, In reply, Aty. Teylan, in her letter dated January 7, 2015 addressed to that Office, informed that since STERIX is operating outside Marikina City, itis being assessed based on gross receipt applying Section 38 (Situs of the Tax) of the existing Revenue Code of Marikina City Based on the representation made above, STERIX’s principal office is located in Muntinlupa City where it is paying its business taxes based on its 100% gross sales, All sales invoices are recorded in the prineipal office and there are no other registered branches or ‘warehouses in other local government units being maintained by the Company. In view thereof and since STERIX has no branch office, sales outlet or warehouse in said localities the 70%-30% allocation mentioned by Atty. Telan in her letter of January 7, 2015 is not applicable to the issue at hand. Such allocation scheme provided under Article 243(b)(3) of the Implementing Rules & Regulations (IRR) implementing Section 150(b) of the Local Government Code (LGC) of 1991 is applicable only in cases where the business maintains a factory, project office, plant or plantation. In the instant case, the applicable provisions of law is Article 243(6)(2), quoted as follows: “ARTICLE 243. Situs of the Tax. — (a) x xx. Xxx xx XXX (b) Sales Alloca (1) Xxx (2) In cases where there is no such branch, sales office, or warehouse in the locality where the sale is made, the sale shall be recorded in the principal office along with the sales made by said principal office and the tax shall acerue to the city or municipality where said principal office is located.” (Emphasis ours) With regard to the required business permit, this Bureau, based on the information submitted, believes that there is no need for STERIX to secure business permit from local government units concemed as the presence of its personnel to said localities is merely to fulfill its contractual obligation to its clientele and their presence to carry out this obligation contracted by the business from their clients is only temporary, This opinion is expressed in view of the tenets embodied in Section 147. which provides that the imposition and collection of such regulatory fee (business permit fee) “commensurate with the cost of regulation, inspection and licensing before any person may engage in such business,” ‘TLD-2015-0108 (STERIX Business Permit Requirement Marikina City) Page 2To elucidate and affirm our stand on the issue and as viewed from a different perspective, the absence of any branch office, sales outlet or warehouse of STERIX repudiate the requirement of securing business permit as, in the first place, there is no fixed business establishment to regulate, inspect, and issue license to justify the imposition, For after all how can a regulating authority impose its authority to regulate when the very subject of the regulation is non-existent. Lastly, on the issue of business permit fee being computed based on the entire revenue of the operations of STERIX, Article 233 of the Implementing Rules & Regulations (IRR) implementing Section 147, in relation to Section 151, all of the LGC, is quoted as follows: “ARTICLE 233. Fees and Charges. — The municipality may impose and collect such reasonable fees and charges on businesses and occupations and, except as reserved to the province in Article 229 of this Rule, on the practice of any profession or calling before any person may engage in such business or occupation, or practice such profession or calling provided that such fees or charges shall only be commensurate to.the cost of issuing the license or permit and the expenses incurred in the conduct of the necessary inspection or surveillance, No such fee or charge shall be based on capital investment or gross sales or receipts of the person or business liable therefor.” (Emphasis ours) ‘We hope that this will help clarify matters. Very truly yours, 2 oe SALVADOR M. DEL CASTILLO OIC-Executive Director Copy furnished: ‘The City Treasurer Marikina City 40108 (STERIX.Business Permit Requirement, Marikina City) Page 3PECElVvel 29 FEB 2016 SW ManpowerGroup 1: (632} 7370123 (632}650 3432 23 February 2016 Stee BUREAU OF LOCAL GOVERNMENT FINANCE 8" Floor, EDPC Bldg., BSP Complex Roxas Bivd., Manila oat a Jay fic. Rees fe Attention: Hon. Jocelyn T. Pendon OIC - Executive Director Subject: Request for Opinion/Ruling on Local Business Taxes Dear Madam: We wish to seek the opinion or ruling of your Honorable Office regarding the need to register with and pay business taxes to a local government where our Company has no branch or sales office but where our Company has assigned associates to render services to a client located in said area Manpower Outsourcing Services, Inc. is a business engaged in job contracting and outsourcing services. The Company provides temporary staffing services to its clients by assigning its regular employees to render various services to meet its client’s business needs. The Company is duly authorized by the Department of Labor and Employment to engage in such a business and has a D0 18-A series of 20911 license for this purpose. The Company has a client in Tanauan Batangas and has deployed certain associates to render services to said client in its office premises there. The Company has no sales office or other physical presence in Tanauan. All the Company's sales, invoicing and other income-generating activities are performed in its main office in Ortigas Center, Pasig City. This notwithstanding, the Company's client is requesting it to apply for a business license in the Municipality of Tanauan, Batangas and pay local business taxes for the work performed by the ‘Companys employees there. The Company also renders services to clients located in other parts of the Philippines but has never registered with any of the local governments nor paid local business taxes because it has no offices, sales or invoicing done in said locations. In this connection, we are requesting your opinion or ruling on this matter, specifically if the Company should apply for a business permit and pay local business taxes to the Municipality of Tanauan, Batangas. We trust that your Honorable Office will merit our request your prompt and favorable attention. Sincerely, [Jose Carloys. Baizas Director fdr Legal and HR